Comprehensive AUD/USD for November 7, 2023

In this comprehensive analysis, Ultima Markets brings you an insightful breakdown of the AUD/USD for 7th November 2023. 

Key Takeaways

• Changes in the RBA’s monetary policy: The Reserve Bank of Australia will announce its latest interest rate decision at noon. Due to the unexpectedly strong CPI in Australia in the third quarter and the rebound in housing prices to near record highs, the market expects that the possibility of the Reserve Bank of Australia raising interest rates by 25 basis points this week reaches 60% . On the contrary, if there is no sign of tightening in monetary policy, AUD/USD will enter a rapid downward trend. 
• Bullock has a hawkish attitude: The new chairman of the Reserve Bank of Australia, Bullock, said in a public speech that “if the inflation outlook shows a substantial increase, we will not hesitate to further raise the cash rate.” Expectations that the Reserve Bank of Australia will resume raising interest rates have triggered a strong rise in the Australian dollar recently. 

AUD/USD Technical Analysis 

AUD/USD Daily Chart Insights

• Stochastic Oscillator: The indicator has entered the overbought area, indicating the strength of the current bullish trend. Although there were signs of a reversal yesterday, we cannot judge that a reversal is coming without confirmation. 
• Moving average: After the exchange rate strongly breaks through the 33-day moving average and the 65-day moving average, it hints that the current bullish trend is coming, and the resistance level is looking towards the 200-day moving average (dashed line). There is a certain probability of going back to the green 5-day moving average. 

AUD / USD 1-hour Chart Analysis

• Stochastic oscillator: The indicator is still in the oversold area. Judging from the market trend, it is currently in the consolidation stage. Wait for the indicator to show a long signal before paying attention to whether there are trading opportunities. 
• Price Action: After consolidation for two trading days, the market formed a rectangular range. After falling below the range, the exchange rate will most likely continue to decline in the short term. Pay attention to the support price below. 
• Support price: The red 65-period moving average is the first target support level. If the market enters a deep correction, continue to look at the upper edge of the upward channel line. 

Ultima Markets MT4 Pivot Indicator

• According to the pivot indicator in Ultima Markets MT4, the central price of the day is established at 0.64993, 
• Bullish Scenario: Bullish sentiment prevails above 0.64993, first target 0.65131, second target 0.65371; 
• Bearish Outlook: In a bearish scenario below 0.64993, first target 0.64752, second target 0.64608. 

Conclusion 

CAD Bounced, But Appreciation Capped 

The Canadian dollar has strengthened to 1.37 per USD, bouncing back strongly from the one-year low of 1.39 reached on November 1st.

This recovery was strengthened by a general retreat in the DXY index, as weak economic data from the US reinforced the Federal Reserve’s indications that they may hold off on further interest rate hikes.

However, the appreciation was limited by disappointing domestic economic data, which increased expectations of a less aggressive stance by the Bank of Canada (BoC).

(USD/CAD Six-month Chart) 

CAD Resurgence: Unveiling the Drivers

The rebound in the CAD is primarily driven by external macroeconomic factors:

DXY Index Retreat: The decline in the DXY index, which measures the USD’s strength against major currencies, is a pivotal factor.

This decrease in USD strength is linked to weak economic data from the United States, reinforcing the Federal Reserve’s inclination toward a more prudent approach to interest rate hikes.

This decline in USD strength has provided essential support for the CAD’s appreciation.

Domestic Economic Headwinds: Understanding the Constraints

The CAD’s upward momentum is hindered by domestic economic challenges:

• Rising Unemployment: Canada’s unemployment rate surged to 5.7% in October, the highest level in 21 months. This unexpected increase has raised concerns about the stability of the Canadian labor market.
• Sluggish Wage Growth: The ongoing deceleration in wage growth is a significant issue. Slower wage growth affects consumer spending and economic sentiment, adding to uncertainty in the market.
• Faltering Job Creation: Job creation in Canada has fallen short of expectations, highlighting a pronounced weakness in the labor market. The inability to meet job creation projections amplifies concerns about the overall health of the Canadian economy.

Bank of Canada’s Approach: Navigating Economic Waters

The role of the Bank of Canada is paramount in shaping the CAD’s trajectory:

• Interest Rate Policy: In a recent meeting, the BoC opted to maintain unchanged interest rates. However, the central bank has expanded its flexibility regarding future rate hikes. This shift indicates the BoC’s concern about the repercussions of previous tightening measures.
• Dampened Demand and Inflation: The BoC has recognized that previous rate hikes have curbed demand and restrained inflation. This suggests a more measured approach to monetary policy, striking a balance between stimulating economic growth and managing inflation.

Conclusion: An Insightful Perspective

To sum up, the CAD’s resurgence from a one-year low is underpinned by a complex interplay of external and domestic factors.

While the retreat of the DXY index and the Federal Reserve’s policy stance have buoyed the CAD, the constraints of a challenging labor market and the BoC’s nuanced policy approach remain substantial challenges.

Staying vigilant in monitoring these factors is vital for investors and businesses as they navigate the intricate financial landscape.

The Impact of BOE and FED Decisions on the British Pound and Economy

The British pound has seen a remarkable resurgence in recent times, climbing above the $1.23 mark against the US dollar. This is the highest level for the pound since mid-October 2022.

The rise can be attributed to key decisions and outlooks from both the Bank of England (BOE) and the US Federal Reserve.

Factors Driving the Pound’s Rise

Several factors related to the stances of the BOE and Fed have contributed to lifting the pound:

• Fed holds interest rates steady – The Fed’s decision not to raise rates further due to signs of slowing US job growth has boosted confidence in the pound as an investment option compared to the dollar.
• BOE maintains firm interest rate stance – By holding its key rate at a 15-year high of 5.25%, the BOE has signaled its commitment to stability and shored up faith in the pound.
• Reassurance from Governor Bailey – Comments from BOE Governor Andrew Bailey signaling no near-term rate cuts and upholding guidance on further hikes has reinforced the bank’s position.

(GBP/USD 1-year Chart) 

Bank of England Outlook and Policy

The BOE has provided clarity around its monetary policy outlook and intentions:

• No rate cuts expected soon – Bailey has indicated rate reductions are not on the horizon, offering certainty to markets.
• Potential 3 quarter-point cuts by end 2024 – Markets speculate up to 75 basis points in cuts could come in 2024 as the BOE eyes the weak growth outlook.
• On track to meet inflation target – BOE forecasts show inflation is slated to halve by year-end to meet the 2% target.
• Inflation to remain above target until late 2025 – Projections see inflation at 3.1% in Q4 2024 before declining to 1.9% in Q4 2025, underscoring the bank’s anti-inflation stance.

Bank of England Interest Rate Projections

(United Kingdom Interest Rate, BOE)

Economic Headwinds Facing the UK

While positive for the pound, the BOE has cautioned around significant challenges for the UK economy:

• Q3 growth stagnation – Economic expansion stalled in the third quarter of 2022.
• Minimal Q4 growth expected – Forecasts show just 0.1% GDP growth to close out 2022.
• Subdued 2023 growth outlook – The BOE sees the UK economy contracting throughout 2023.
• High energy costs hit output – Expensive energy is forcing firms to cut back production.
• Labor market concerns – Despite low unemployment, weak wage growth and poor productivity weigh on the economy.
• Global slowdown impacts exports – Weaker EU and US markets are dampening demand for UK exports.

Impact on the British Pound

The pound’s rally indicates it remains an attractive safe-haven currency investment despite clouds on the UK’s economic horizon:

• BOE policy credibility supports pound – The central bank’s consistency and transparency in laying out its policy intentions instills market trust in the pound.
• UK rate advantage persists over dollar – The Fed being closer than the BOE to ending its tightening cycle preserves higher yield appeal for sterling.
• Inflation fight remains intact – The BOE’s commitment to getting inflation down reinforces the pound as a stable store of value.
• Economic challenges mainly priced in – Markets have largely priced in the headwinds facing the UK economy, limiting downside for the pound.

Conclusion

In summary, the BOE and Fed’s policy signaling has provided key support for the British pound’s surge above $1.23.

Despite economic struggles ahead, the UK central bank’s firm anti-inflation stance and rate advantage over the dollar are likely to continue underpinning sterling strength.

However, further dollar gains on aggressive Fed tightening or an unanticipated BOE pivot on rates pose risks.

Overall, the pound looks set to remain on solid footing as long as the BOE maintains policy credibility.

Comprehensive Brent Oil for November 3, 2023

In this comprehensive analysis, Ultima Markets brings you an insightful breakdown of the Brent Oil (UKOUSD) for 3rd November 2023.

Key Takeaways 

• Russian supply increases: Tanker tracking data monitored by foreign media show that Russia’s seaborne crude oil exports have been exceeding the country’s export target as part of the OPEC+ agreement for several weeks. Observed exports in the most recent week were 360,000 barrels per day above target exports. In the most recent period, four-week average daily exports were nearly 200,000 barrels per day above that level.
• The impact of the Israeli-Palestinian conflict is gradually weakening: Traders are still worried that something will cause the conflict to spread beyond Israel and its immediate neighbors. But that influence has steadily waned, even after Israel began its ground offensive in Gaza. 

Brent Oil Technical Analysis 

Brent Oil Daily Chart Insights

• Stochastic Oscillator: The fast line is about to cross the slow line, suggesting that the current bullish power may have the upper hand. However, we are still temporarily bearish until there is a clear signal. 
• Price Action: After oil prices showed a pin bar on Wednesday, the closing line showed a typical harami price action yesterday. If it breaks through the high point of the pin bar today, the bulls will clearly have the upper hand, and the market may reverse upward. 
• Moving average: The black 65-day moving average and the green 240-day moving average form a rectangular range. A breakthrough in any direction of the range may be the next trend direction. 

Brent Oil 1-Hour Chart Analysis

• Support and resistance price: The current resistance of oil price is a repeatedly verified downward trend line, and the bottom is the black 65-period moving average potential support level. 
• Fibonacci retracement level: Since the internal structure of yesterday’s upward trend is a complete 5-wave structure, it is temporarily judged to be a driving wave. Wait for the market to fall back to the Fibonacci retracement level of 38.2% to observe whether there is a signal to continue to rise.  
• Stochastic Oscillator: It is worth noting that the indicator is currently seriously overbought, and there is a certain probability of a correction during the Asian session. 

Ultima Markets MT4 Pivot Indicator

• According to the pivot indicator in Ultima Markets MT4, the central price of the day is established at 87.361, 
• Bullish Scenario: Bullish sentiment prevails above 87.361, first target is 89.077, second target is 89.769. 
• Bearish Outlook: In a bearish scenario below 87.361, first target 86.688, second target 84.991. 

Conclusion 

The Bright Outlook for US Stocks: A Market Analysis

In November 2023, the US stock market witnessed a significant upswing, reinforcing expectations of an end to the era of rate hikes.

The Dow Jones index soared by more than 560 points on November 2nd, marking its most remarkable daily gain since June. Simultaneously, the S&P recorded a 1.89% surge, its most substantial single-day increase since April. The Nasdaq also celebrated a robust performance, closing 2.36% higher, its best showing since July.

This impressive market rally was underpinned by gains in the energy and real estate sectors, both of which secured advances exceeding 3.0%. These substantial gains contributed to all eleven S&P sectors concluding the session on a positive note.

US Stocks Saw Strong Buying Across Sectors 

The momentum behind these stock market surges is closely tied to growing expectations regarding the Federal Reserve’s future monetary policy.

As this sentiment gains traction, investors and market participants are becoming increasingly confident that the central bank is nearing the completion of its rate-hiking efforts.

Additionally, the benchmark US 10-year yield fell to its lowest level in three weeks, reaching 4.65%. This decline further signifies the market’s anticipation of a more accommodative monetary stance

Robust Sector Performance

One of the most notable aspects of this remarkable stock market rally is the broad-based nature of the gains. Notably, the energy and real estate sectors exhibited exceptional strength, each securing advances exceeding 3.0%.

These gains underscore the market’s confidence in the economic outlook and support the view that the recovery remains firmly on track.

(Sector Performance, Bloomberg) 

Signs of a Weakening Job Market

While the stock market flourishes, the job market faces challenges, which require close scrutiny:

• Unemployment Claims: The number of Americans applying for unemployment benefits increased to 217,000, surpassing market estimates. This indicates that unemployed individuals are encountering difficulties in finding employment.
• Continuing Jobless Claims: Continuing claims rose to 1,818,000, exceeding market expectations. These figures align with signals from the Federal Reserve, suggesting that labor market conditions are softening.
• Nonfarm Payrolls: All eyes are now on the upcoming nonfarm payrolls report, with economists predicting an increase of 180,000 jobs in October, following a substantial gain in September. This report will provide crucial insights into the job market’s health.

(Initial Jobless Claims, United States Department of Labor) 

Bottom Line

In conclusion, the US stock market’s recent surge is a significant development with far-reaching implications. As the market regains strength, it underlines the growing confidence in a more accommodative monetary policy by the Federal Reserve.

However, it’s vital to balance this optimism with the challenges in the job market, as signs of weakness in unemployment claims and continuing claims signal potential hurdles in the economic recovery.

The interplay between these factors will undoubtedly shape the trajectory of the US economy in the months to come.

The Impact of FED’s Decision and ISM Manufacturing PMI in November 2023

In November 2023, the Federal Reserve (FED) once again held its rates unchanged, marking the second consecutive time for such a decision. Investors and financial experts alike anticipated and conjectured about this FED move.

In addition, the Manufacturing Purchasing Managers Index (PMI) for October was released by the Institute for Supply Management (ISM), providing insight into the status of the US manufacturing industry.

Key Takeaway: FED’s Inflation Concerns

The FED’s Response to Inflation

The foremost concern addressed by the FED was the persistence of high inflation. FED Chairman Jerome Powell emphasized that inflation had exceeded the FED’s long-term target of 2%. Specifically, the total Personal Consumption Expenditures (PCE) prices had surged by 3.4% over the 12 months ending in September.

(Federal Funds Rate, FED)

Monetary Policy Consideration

Powell’s statement shed light on the FED’s approach to managing inflation. He articulated that any future rate hikes would be executed with great caution, considering factors such as the cumulative impact of prior rate adjustments, the time lag in the transmission of monetary policy effects, and the prevailing economic and financial market conditions.

Market Impact: USD Index Decline

Following the FED’s announcement, the USD index (DXY) experienced a noticeable decline, moving from 106.66 to 106.35. This underscores the strong correlation between the FED’s monetary policy decisions and currency markets, making them of paramount importance to traders and investors.

Insights into ISM Manufacturing PMI for October 2023

The Escalating Contraction

The ISM’s Manufacturing PMI data for October 2023 unveiled a worrisome trend. The U.S. manufacturing sector continued to contract, with the pace of contraction intensifying. The PMI declined by 2.3%, reaching 46.7%, in contrast to the 49% recorded in September, emphasizing the sector’s ongoing challenges.

(Manufacturing Purchasing Managers Index PMI,ISM)

Decline in New Orders

A critical factor contributing to the sector’s struggles is the downturn in new orders. Firms are grappling with reduced demand for their products, which has a detrimental impact on production and overall growth.

Challenges in Export Orders

While there was a moderate rise in the new export orders index, it remained within contraction territory. This suggests that the international market is not providing the expected boost to U.S. manufacturers.

Backlogs of Orders: A Persistent Issue

The backlogs of orders index also saw a slight decline, maintaining its position within sharp contraction territory. This signifies that manufacturers are contending with the backlog of existing orders, which can have ripple effects on future production.

Bottom Line

In conclusion, the FED’s unwavering stance on interest rates and the ISM Manufacturing PMI for October 2023 offer essential insights into the state of the U.S. economy. Staying well-informed about these developments is vital for making sound financial decisions in a constantly evolving economic landscape.

Comprehensive USD/CAD for November 2, 2023

In this comprehensive analysis, Ultima Markets brings you an insightful breakdown of the USD/CAD for 2nd November 2023. 

Key Takeaways 

• Federal Reserve’s attitude: The interest rate decision of Federal Reserve did not change the policy interest rate as expected. Fed members have been working hard to balance the two risks. They do not want to raise interest rates too much and cause an unnecessary deep recession, nor do they want to accelerate inflation again or stabilize well above the 2% target. 
• The Canadian dollar may be favored: The Canadian employment survey shows that the labor market continues to be tight and wages continue to rise significantly. The unexpectedly strong data raised the possibility of further interest rate hikes from the Bank of Canada, while the prospect of higher oil prices also increased the likelihood of a higher Canadian dollar. 

USD/CAD Technical Analysis 

USD/CAD Daily Chart Insights

• Stochastic Oscillator: After the indicator formed a short signal in the overbought area, it began to turn downward yesterday, suggesting that the exchange rate may begin to decline. 
• Price Action: After the exchange rate fluctuated at a high level for four trading days, it closed as a small doji candle yesterday. If it finally closes the dark candle bar today, the market may adjust downward in the future. 
• 5-day moving average: The 5-day moving average has supported the continuous upward trend. If the market closes below the 5-day moving average, the upward trend of the exchange rate will end in the short term. 

USD/CAD 1-hour Chart Analysis

• Stochastic oscillator: The indicator is still in the oversold area, and there is no bull signal, suggesting that the current short forces have the upper hand and cannot easily choose to buy the bottom. 
• Price Action: Since October 31st, it has fluctuated at high levels to form a rectangular range. After the market fell below the range, the red 65-period moving average failed to support the decline. The next target of the market is the black support line, which may also be the 200-period moving average. 

Ultima Markets MT4 Pivot Indicator

• According to the pivot indicator in Ultima Markets MT4, the central price of the day is established at 1.38655, 
• Bullish Scenario: Bullish sentiment prevails above 1.38655, first target 1.38898, second target 1.39233; 
• Bearish Outlook: In a bearish scenario below 1.38655, first target 1.38321, second target 1.38076. 

Conclusion